Barclays analysts told investors in a note Wednesday that Splunk (NASDAQ:SPLK) is "another CRM-type opportunity," and they think investors should revisit the story.
The analysts, who have an Overweight rating and a $130 price target on the stock, acknowledged that SPLK "has a poorly optimized P&L structure" but noted that it is something its new management is addressing.
"The opportunity is not dissimilar to what we have seen at CRM in recent months," they said. "True, the company is in a more competitive market, but even here, there are signs of hope."
"Splunk's P&L looks just as poor as CRM's did only a few months ago. G&A and especially S&M spending is running way above the industry norm for the size of the business and the growth achieved. The new management team, with the support of several activist investors, is starting to address this, but we believe there is still ample opportunity left," they added.
Barclays believes Splunks' recent changes on the go-to-market side, which includes refocusing on security, outcome selling, and a single seller model, should stabilize the growth and limit future discussions around the long-term outlook.
"With that, we believe SPLK represents an interesting asset that could deliver solid growth with significant margin upside. At 18x CY24E EV/FCF, we think this opportunity is not priced correctly, and we think investors should revisit the story," concluded the analysts.